Business Case for CSR

The “business case” refers to the commercial business benefits of CSR in quantifiable terms which convince ‘non-believers’ of the business benefits of CSR. Today consumers, investors, governments and even employees have become more sophisticated and more aware of good corporate behaviour, or lack thereof.

In this new business environment, a company’s reputation has become one of its most valuable assets, and CSR has become one of the key components of corporate reputation.

Positive CSR experiences build confidence and goodwill with stakeholders. Many organisations have developed clear CSR efforts as strategic branding and management approach in achieving a win-win outcome.

Business Case for CSR

• Create Shareholder Value
  
• Increased Revenue Base
  
• Strategic Branding
  
• Operations Efficiency
  
• Increased Productivity and Quality
  
• Access to New Markets
  
• Better Access to Capital
  
• Human & Intellectual Capital
  
• Lower Business Risk

Create Shareholder Value

Investors are becoming more concerned to invest in companies that act with good corporate governance and social responsibility. Increasingly, a company’s performance as a responsible business is key to its financial and stock market standing, helping to protect it from instability and share price volatility.

Increased Revenue Base

CSR can boost factors that drive revenue in important ways. CSR initiatives and cause-related marketing could build reputation and goodwill among suppliers and customers. Employees who identify with the social mission are likely to be motivated, committed, and more prepared to make sacrifices as a team member.

Strategic Branding

A company’s reputation is fundamental in maintaining and attracting new customer base. Global consumers today are more selective and sensitive about buying eco-friendly products and care to consider company’s image and CSR efforts. A distinctive CSR profile serves as a strategic branding tool in differentiating from competitors.

Example: Marks and Spencer’s has effectively positioned itself as the most environmentally sound and socially responsible UK retailer, while in contrast is Primark, another UK retailer, which has faced reduction in the number of consumer footfalls, because of its wide negative publicity.

Operations Efficiency

The efficiency of a business is about productivity and effective use of resources. CSR can help to increase efficiency through environment conservation and recycling initiatives, as part of eco-efficiency strategy.

Positive management-employee relations are also crucial in bringing about good customer service, productivity and product innovation.

Example: Hotel Orchid, Sony, Toyota and ITC have adopted environmental sustainable methods in the areas of solid waste management, energy efficiency, water conservation and preservation, and others. These have reduced their operational cost to a large extent and have also provided unique positioning in the minds of the consumer.

Increased Productivity and Quality

CSR facilitates increased productivity within the organisation.

Example: Companies that improve their supply chain practices, labour conditions, and facilitate increased employee involvement, results in reduction in errors and defective pieces in their work producing higher quality of products and services_⁵ .

Access to New Markets

CSR also provides business organisations with access to new markets, improves competitiveness and market positioning.

Example: A small firm that is certified to have environmental and social standards6 can be a supplier to international retailers like Marks and Spencer’s, Levi’s, Mitsubishi, and so on.

This enhances the company’s brand image and reputation and enjoys greater credibility with the government as well as political organisations.

Better Access to Capital

Access to capital enables a company to grow and make timely investment. Companies with good CSR standing are likely to be able to secure equity and debt capital with utmost ease. The growth emphasis in Socially Responsible Investment (SRI) is a clear indication of likely future trends.

Human & Intellectual Capital

A company’s human and intellectual capital is one of its most valuable assets. Good workplace conditions and relations can help a company to attract, keep and develop human capital, keeping operations and staff morale high.

Community involvement can play a complementary role in developing new skills set, encouraging participation, sharing and team spirit in the workplace as well.

Example: The employees in the Tata Group, L&T, Infosys, and Wipro find the organisations to be more employee sensitive and friendly.

Lower Business Risk

Companies are being held increasingly accountable for their actions today. Such business risk could affect reputation, access to capital and even long-term viability in some instance. Proactive dialogue with external stakeholders can help to foster understanding, in pre-empting and minimising the repercussions.

Example: The Coca-cola Pesticide case in India, affected the trust of all its stakeholders, right from the consumers to the investors of Coca-cola. In that period, their sales declined by up to fifteen per cent across the country.

If Coco-cola had fulfilled its CSR, it wouldn’t have undergone this crisis and would have certainly reduced its social, environment and economic risk exposure to a large extent.